[Intl-tobacco] Gallaher accused of Hezbollah deal

[Robert Weissman]

Tobacco giant accused of Hezbollah deal
The Sunday Times
February 26, 2006

INSIGHT

ONE of Britain=92s biggest tobacco companies has been accused of agreeing t=
o
=93enlist=94 the services of a militant Islamic group, according to papers
lodged with the High Court last Friday.


Gallaher=92s main distributor in the Middle East claims that the firm agree=
d
to an approach to Hezbollah to recoup taxes of =A31m that it had paid to th=
e
Iranian government, which funds the organisation. If successful, Hezbollah
was allegedly promised a =93success fee=94 of up to =A3287,000.

Hezbollah=92s armed wing, which has been blamed for a series of atrocities,=
 is
a proscribed organisation in Britain and the United States. Those financing
or supporting the group face criminal penalties.

The allegation has been made during an acrimonious legal battle between
Gallaher and Tlais Enterprises, its main distributor in the Middle East,
Africa and Latin America until last year. Each party is accusing the other
of dubious business tactics and a trial is scheduled for the High Court nex=
t
year.

Yesterday Gallaher, the maker of Benson & Hedges and Silk Cut cigarettes,
=93denied categorically=94 that it had entered into any arrangement with
Hezbollah. The company, which will announce its financial results for 2005
on Wednesday, counter-claims that Tlais Enterprises is responsible for
facilitating the smuggling of its products.

However, Tlais Enterprises, which is owned and run by Ptolomeous Tlais, a
Lebanese businessman, states in a High Court claim which was lodged last
week that: =93Gallaher enlisted the services of a Middle Eastern group (tha=
t
is proscribed in the US) to negotiate on its behalf, in an attempt to
recover the duty.=94

The group is Hezbollah, based in Lebanon, and correspondence between Tlais
and Gallaher seen by The Sunday Times appears to substantiate the
allegation. It is alleged that the plan was aborted after Hezbollah pulled
out. It is not known whether the deal was brokered with the political or
military wing of Hezbollah.

The UK does not formally ban links to the political party, but the US
government makes no distinction between the two.

It is understood that a covert video recording of Gallaher executives
discussing the matter will be disclosed in the court proceedings. Gallaher
says it has not heard the recording.

The row over the payment of Iranian duties dates back to Gallaher=92s decis=
ion
to become a significant force in the estimated =A34 billion Iranian tobacco
market in 2002. In October of that year, Gallaher sent a high-powered
delegation to accompany Tlais on a visit to Iran. It included Mark Rolfe,
group finance director, and Norman Jack, then divisional director for the
Middle East.

The company began shipping millions of cigarettes to Tlais Enterprises, via
Dubai, from where they were sent on to distributors in Iran. But the
cigarettes were found to be unfit for consumption as they had deteriorated,
possibly during transit. Gallaher had, however, already paid the Iranian
authorities more than =A31m in duties to import the cigarettes which it was
now unable to sell.

In June 2003, Rolfe and Jack travelled to the Middle East for a heated
meeting with Tlais at the five-star Regency Palace hotel on the
Mediterranean coast of Lebanon. Also present were Jack=92s then boss Mounif
Fawaz, Tlais=92s brother known as Abu Ahmed, and Tlais=92s lawyer Dinos
Saveriades.

It was at this meeting that the Tlais Enterprises camp was alleged to have
suggested that Hezbollah might be able to use its acknowledged influence
with the Iranian government to recover the duty. The plan was said to
involve transferring ownership of the cigarettes to Hezbollah, which would
then reclaim the taxes.

A spokesman for Gallaher said: =93At that meeting Mr Rolfe made it clear th=
at
it was normal for govenments to refund duty paid on goods which were
damaged. Mr Tlais had some doubts about whether this would be possible in
Iran. Mr Tlais=92s brother made a reference to Hezbollah which Mr Rolfe
interpreted as a joke in bad taste.=94

However, Tlais alleges that Gallaher consented to the plan, although both
sides agreed that Hezbollah would not be referred to directly in
correspondence. Instead, they would simply refer to =93the group=94.

When Rolfe returned to Britain he immediately wrote to Tlais thanking him
for the hospitality and the =93full and frank=94 business discussions.

The =93overall objective=94, wrote Rolfe, was =93to mitigate the losses suf=
fered
by Gallaher . . . since the more we can save, the more positive my fellow
directors will feel about our business=94. Rolfe then refers to Tlais
Enterprises using its =93own connections to attempt the duty recovery=94 in
Iran.

Jack also wrote to Tlais, saying: =93You are authorised to commence duty
recovery procedures.=94 Tlais responded that they =93were proceeding to arr=
ange
for the Dorchester (brand of cigarettes) to be transferred into the name of
the group who are proceeding to attempt to recover the duty for the goods o=
n
your behalf=94. Tlais also informed Rolfe that =93the group=94 felt it had =
a =9360%
chance=94 of success.

In August 2003 an even more high-powered Gallaher delegation arrived in
Lebanon for a meeting with Tlais. Rolfe and Jack were accompanied by Tom
Keevil, Gallaher=92s company secretary and lawyer, who had been copied in o=
n
earlier correspondence about the alleged Hezbollah deal.

After this meeting, Tlais received another letter from Gallaher stating:
=93The duty recovery issue in Iran is to be resolved . . . You stressed tha=
t
there were no guarantees that the duty could be recovered but that you and
your associates would do your best to mitigate losses in this area. You
further advised that you believed the process had stumbled recently.=94

Days later Tlais told Gallaher that Hezbollah was unable to help. According
to a source close to the negotiations, the radical Islamic group had an
objection to dealing with tobacco.

Tlais Enterprises still faces claims from its distributors in Iran who say
they were left out of pocket. One, Sarfaraz Mobaraki, chairman of Parsian
Fojan, wrote to Tlais on December 31, 2005: =93Moving (the damaged cigarett=
es)
for Hezbollah . . . brought us a very big loss.=94

A Gallaher spokesman said: =93Gallaher has never offered to pay any funds t=
o
Hezbollah. The true position with the damaged stock intended for the Irania=
n
market is that Gallaher advised Tlais Enterprises to seek to recover duty
through legitimate channels, since this would reduce the amount of money
lost as a result of the damage to the goods. So far as we are aware, Tlais
did not recover any duty.=94

The Hezbollah allegation is the latest to surface during the legal battle
between the FTSE 100 tobacco firm, worth =A35.9 billion, and its former
distributor. Last December The Sunday Times revealed that Tlais had accused
Gallaher of =93permitting=94 the illegal smuggling of its cigarettes.

Gallaher denies the claims and alleges that Tlais Enterprises was, in fact,
responsible for the smuggling. It terminated Tlais Enterprises=92s
distribution contract because of concerns by British customs over the issue=
.

Tlais has also said there was a meeting between a senior Gallaher executive
and Uday Hussein, Saddam=92s son. He claims it was to follow up on the supp=
ly
of cigarettes to Iraq despite United Nations sanctions.

Gallaher said in a statement at the time that any =93imports were made with=
out
(its) knowledge or consent=94 and it had =93no convincing evidence=94 that =
its
executives were involved. In a statement yesterday Tlais said: =93We are
holding a large quantity of evidence that substantiates all aspects of the
pleadings presented to the court.=94

Jeff Jeffery, Gallaher=92s head of corporate affairs, denied that the firm =
had
been involved =93in any way=94 with Hezbollah. He said: =93Gallaher believe=
s it
has robust defences to the claims made by the distributor and will
vigorously contest these claims in court.=94


Insight: Jonathan Calvert, Michael Gillard, Andrew Rowell, Robert Winnett
and Holly Watt

 http://www.timesonline.co.uk/[...]2087-2058698,00.html